Edgar Filing: WENDY'S/ARBY'S GROUP, INC.

form10q_110608.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2008

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

WENDY’S/ARBY’S GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


1155 Perimeter Center West, Atlanta, GA		30338
(Address of principal executive offices)		(Zip Code)

(678) 514-4100

(Registrant’s telephone number, including area code)

TRIARC COMPANIES, INC.

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

There were 469,769,742 shares of the registrant’s common stock outstanding as of October 31, 2008.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

(FORMERLY TRIARC COMPANIES, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 30,			September 28,
		2007(A)		2008
				(Unaudited)
	(In Thousands)
ASSETS

Current assets:
Cash and cash equivalents	$	78,116		$	26,032
Short-term investments		2,608			-
Accounts and notes receivable		27,610			21,489
Inventories		11,067			11,417
Deferred income tax benefit		24,921			15,046
Prepaid expenses and other current assets		25,932			30,626
Total current assets		170,254			104,610
Restricted cash equivalents		45,295			3,958
Notes receivable		46,219			46,486
Investments		141,909			70,452
Properties		504,874			513,022
Goodwill		468,778			477,387
Other intangible assets		45,318			47,617
Deferred income tax benefit		4,050			25,746
Deferred costs and other assets		27,870			32,892
	$	1,454,567		$	1,322,170

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current portion of long-term debt	$	27,802		$	54,915
Accounts payable		54,297			52,684
Accrued expenses and other current liabilities		117,785			115,499
Current liabilities related to discontinued operations		7,279			5,651
Total current liabilities		207,163			228,749
Long-term debt		711,531			666,240
Deferred income		10,861			14,139
Other liabilities		75,180			78,653
Minority interests in consolidated subsidiaries		958			154
Stockholders’ equity:
Class A common stock		2,955			2,955
Class B common stock		6,402			6,410
Additional paid-in capital		291,122			291,331
Retained earnings		167,267			42,715
Common stock held in treasury		(16,774	)		(13,180	)
Accumulated other comprehensive income (loss)		(2,098	)		4,004
Total stockholders’ equity		448,874			334,235
	$	1,454,567		$	1,322,170

(A) Derived from the audited consolidated financial statements as of December 30, 2007.

See accompanying notes to unaudited condensed consolidated financial statements.

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WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

(FORMERLY TRIARC COMPANIES, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008
	(In Thousands Except Per Share Amounts)
	(Unaudited)
Revenues:
Sales	$	285,496		$	287,641		$	830,566		$	860,560
Franchise revenues		21,777			22,730			62,855			65,679
Asset management and related fees		16,940			-			49,659			-
		324,213			310,371			943,080			926,239
Costs and expenses:
Cost of sales		210,940			222,206			610,799			655,643
Cost of services		6,562			-			19,760			-
Advertising		20,929			17,674			59,316			62,674
General and administrative		42,009			36,075			155,567			123,108
Depreciation and amortization		20,022			30,701			54,411			64,387
Facilities relocation and corporate restructuring		1,807			(82	)		81,254			812
Settlement of preexisting business relationships		-			-			-			(487	)
		302,269			306,574			981,107			906,137
Operating profit (loss)		21,944			3,797			(38,027	)		20,102
Interest expense		(15,489	)		(13,585	)		(46,164	)		(41,020	)
Investment (loss) income, net		(1,083	)		(1,376	)		39,690			(76,497	)
Other income (expense), net		1,101			1,062			5,866			(2,279	)
Income (loss) from continuing operations before income taxes and minority interests		6,473			(10,102	)		(38,635	)		(99,694	)
(Provision for) benefit from income taxes		(4,174	)		(2,938	)		24,385			12,292
Minority interests in (income) loss of consolidated subsidiaries		1,432			(326	)		(2,832	)		(340	)
Income (loss) from continuing operations		3,731			(13,366	)		(17,082	)		(87,742	)
Income (loss) from disposal of discontinued operations, net of income taxes		-			1,219			(149	)		1,219
Net income (loss)	$	3,731		$	(12,147	)	$	(17,231	)	$	(86,523	)

Basic and diluted income (loss) per share:
Class A and Class B common stock:
Continuing operations	$	0.04		$	(0.14	)	$	(0.19	)	$	(0.95	)
Discontinued operations		-			0.01			-			0.01
Net income (loss)	$	0.04		$	(0.13	)	$	(0.19	)	$	(0.94	)

See accompanying notes to unaudited condensed consolidated financial statements.

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WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

(FORMERLY TRIARC COMPANIES, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,			September 28,
	2007			2008
	(In Thousands)
	(Unaudited)
Cash flows from continuing operating activities:
Net loss	$	(17,231	)	$	(86,523	)
Adjustments to reconcile net loss to net cash provided by continuing operating activities:
Operating investment adjustments, net (see below)		(24,813	)		78,259
Depreciation and amortization		54,411			64,387
Write-off and amortization of deferred financing costs		1,509			7,281
Share-based compensation provision		8,316			3,932
Receipt of deferred vendor incentive, net of amount recognized		2,241			3,743
Straight-line rent accrual		4,746			3,233
Equity in undistributed (earnings) losses of investees		(873	)		754
Minority interests in income of consolidated subsidiaries		2,832			340
Deferred income tax benefit		(24,872	)		(13,466	)
Facilities relocation and corporate restructuring, net provision (payments)		78,332			(4,353	)
Unfavorable lease liability recognized		(3,301	)		(3,372	)
Loss (income) from discontinued operations		149			(1,219	)
Payment of withholding taxes related to share-based compensation		(4,793	)		(177	)
Other, net		(53	)		1,328
Changes in operating assets and liabilities:
Accounts and notes receivable		15,328			(2,508	)
Inventories		325			64
Prepaid expenses and other current assets		(7,137	)		152
Accounts payable, accrued expenses and other current liabilities		(44,946	)		(9,399	)
Net cash provided by continuing operating activities		40,170			42,456
Cash flows from continuing investing activities:
Capital expenditures		(56,270	)		(58,401	)
Cost of business acquisitions, less cash acquired		(1,529	)		(9,540	)
Capitalized Wendy’s merger costs		-			(7,543	)
Investment activities, net (see below)		33,013			34,205
Proceeds from dispositions of assets		2,615			690
Other, net		457			(391	)
Net cash used in continuing investing activities		(21,714	)		(40,980	)
Cash flows from continuing financing activities:
Proceeds from issuance of long-term debt		15,908			53,668
Repayments of notes payable and long-term debt		(15,948	)		(89,313	)
Dividends paid		(24,162	)		(16,101	)
Net distributions to minority interests		(7,911	)		(1,144	)
Other		207			-
Net cash used in continuing financing activities		(31,906	)		(52,890	)
Net cash used in continuing operations		(13,450	)		(51,414	)
Net cash used in operating activities of discontinued operations		(130	)		(670	)
Net decrease in cash and cash equivalents		(13,580	)		(52,084	)
Cash and cash equivalents at beginning of period		148,152			78,116
Cash and cash equivalents at end of period	$	134,572		$	26,032

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WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

(FORMERLY TRIARC COMPANIES, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	Nine Months Ended
	September 30,			September 28,
	2007			2008
	(In Thousands)
	(Unaudited)
Detail of cash flows related to investments:
Operating investment adjustments, net:
Other than temporary losses (a)	$	7,473		$	79,686
Net recognized (gains) losses from trading securities and derivatives and securities sold short		(1,842	)		812
Other net recognized gains		(37,188	)		(2,239	)
Proceeds from sales of trading securities		6,018			-
Other		726			-
	$	(24,813	)	$	78,259
Investing investment activities, net:
Cost of available-for-sale securities and other investments purchased	$	(71,484	)	$	(82,505	)
(Increase) decrease in restricted cash collateralizing securities obligations or held for investment		(28,546	)		40,454
Proceeds from sales of available-for-sale securities and other investments		133,043			75,373
Other		-			883
	$	33,013		$	34,205
Supplemental disclosures of cash flow information:
Cash paid during the period in continuing operations for:
Interest	$	44,771		$	37,692
Income taxes, net of refunds	$	4,141		$	2,944
Supplemental schedule of non-cash investing and financing activities:
Total capital expenditures	$	70,108		$	66,039
Capital expenditures paid in cash		(56,270	)		(58,401	)
Non-cash capitalized lease and certain sales-leaseback obligations	$	13,838		$	7,638

Non-cash additions to long-term debt	$	3,747		$	9,621

(a) The 2008 amount relates to other than temporary losses of $68,086 in our investment in Deerfield Capital Corp. common stock as described in Note 3, $6,500 in our investment in Jurlique International Pty Ltd. and $5,100 in the value of certain of our available for sale securities as described in Note 10.

See accompanying notes to unaudited condensed consolidated financial statements.

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WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

(FORMERLY TRIARC COMPANIES, INC.)

Notes to Condensed Consolidated Financial Statements

September 28, 2008

(In Thousands Except Share Data)

(Unaudited)

(1)	Basis of Presentation

Effective September 29, 2008, in conjunction with the merger with Wendy’s International, Inc. (“Wendy’s”) (see Note 2) the corporate name of Triarc Companies, Inc. (“Triarc”) changed to Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s” and, together with its subsidiaries, the “Company” or “We”). The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of the Company have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In our opinion, however, the Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of the end of the nine-month period and results of operations for the three-month and nine-month periods and our cash flows for the nine-month periods set forth in the following paragraph. Because the merger with Wendy’s did not occur until our 2008 fourth quarter, Wendy’s financial position and results of operations are not included in our financial statements contained in this report. Wendy’s financial position as of September 28, 2008 and results of operations for the three and nine month periods ended September 28, 2008 and September 30, 2007 can be found in our Current Report on Form 8-K being filed with the SEC on or about the same date that this Quarterly Report on Form 10-Q is filed. The results of operations for the nine-month period ended September 28, 2008 will not be indicative of the results to be expected for the full 2008 fiscal year due, in part, to the effect in the nine months ended September 28, 2008 of the other than temporary losses related to our investment in Deerfield Capital Corp. (“DFR”) as described in Note 3 and the effect on our 2008 fourth quarter from the merger with Wendy’s. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (the “Form 10-K”).

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our third quarter of fiscal 2007 commenced on July 2, 2007 and ended on September 30, 2007 (the “three months ended September 30, 2007” or the “2007 third quarter”). Our third quarter of fiscal 2008 commenced on June 30, 2008 and ended on September 28, 2008 (the “three months ended September 28, 2008” or the “2008 third quarter”). Our first nine months of fiscal 2007 commenced on January 1, 2007 and ended on September 30, 2007 (the “nine months ended September 30, 2007” or the “2007 first nine months”). Our first nine months of fiscal 2008 commenced on December 31, 2007 and ended on September 28, 2008 (the “nine months ended September 28, 2008” or the “2008 first nine months”). Each quarter contained 13 weeks and each nine-month period contained 39 weeks. Our 2007 third quarter and first nine months included the calendar basis reported results of Deerfield & Company, LLC (“Deerfield”), our former subsidiary which was sold (the “Deerfield Sale”) on December 21, 2007 (see Note 3). This difference in reporting basis is not material to our condensed consolidated financials statements. With the exception of Deerfield, all references to years, nine-month periods, and quarters relate to fiscal periods rather than calendar periods.

(2)	Merger with Wendy’s International, Inc.

On September 29, 2008, Triarc and Wendy’s completed their previously announced merger in an all-stock transaction in which Wendy’s shareholders received a fixed ratio of 4.25 shares of Wendy’s/Arby’s Class A common stock for each Wendy’s common share owned.

In the merger, approximately 377,000,000 shares of Wendy’s/Arby’s common stock were issued to Wendy’s shareholders. The merger value of approximately $2.5 billion for financial reporting purposes is based on the 4.25 conversion factor of the Wendy’s outstanding shares as well as previously issued restricted stock awards both at a value of $6.57 per share which represents the average closing market price of Triarc Class A Common Stock two days before and after the merger announcement date of April 24, 2008. Wendy’s shareholders held approximately 80%, in the aggregate, of the outstanding Wendy’s/Arby’s common stock immediately following the merger. In addition, effective on the date of the Wendy’s merger, our Class B Common Stock was converted into Class A Common Stock.

The merger will be accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations. In accordance with this standard, we have concluded that Wendy’s/Arby’s will be the acquirer for financial accounting purposes. The total merger value will be allocated to Wendy’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values with the excess recognized as goodwill. Wendy’s operating results will be included in our financial statements beginning on the merger date.

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Outstanding Wendy’s stock options and other equity awards were converted upon completion of the merger into stock options and equity awards with respect to Wendy’s/Arby’s common stock, based on the 4.25:1 exchange ratio. As of the merger date, all outstanding Wendy’s performance units became fully vested at the highest level of performance objectives and were settled in cash for $6,150 in October 2008, based on the fair market value of Wendy’s common shares at the time of the merger.

As of September 28, 2008, our deferred costs related to the merger, which will be included in the total consideration to be allocated to the assets acquired and liabilities assumed, were $18,529 and are included in “Deferred costs and other assets” on the accompanying unaudited condensed consolidated balance sheet.

Certain pre-merger executive and other officers of Wendy’s had employment agreements which included change in control provisions. The total value of these provisions at the merger date was $36,665. Prior to the completion of the merger, the full amount was transferred into a rabbi trust and will be paid to each executive in accordance with the terms of their respective agreements.

The Wendy’s® and Arby’s® brands will continue to operate independently, with headquarters in Dublin, Ohio and Atlanta, Georgia, respectively. A consolidated support center will be based in Atlanta, Georgia and will oversee all public company responsibilities as well as other shared service functions. Upon completion of the merger on September 29, 2008, the combined company had 10,360 system wide restaurants in 50 states and 21 foreign countries and territories, of which 2,577 were owned and operated by Wendy’s/Arby’s and 7,783 were owned and operated by independent franchisees.

(3) Deerfield Sale and Related Transactions

Deerfield Sale

As described in Note 3 to our consolidated financial statements contained in our Form 10-K, on December 21, 2007, we completed the Deerfield Sale resulting in non-cash proceeds aggregating $134,608 consisting of 9,629,368 shares of convertible preferred stock of DFR with a then estimated fair value of $88,398 and $47,986 principal amount of series A senior secured notes of a subsidiary of DFR due in December 2012 (the “DFR Notes”) with a then estimated fair value of $46,210. We also retained ownership of 205,642 common shares in DFR as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale resulted in a pretax gain of $40,193 which was recorded in the fourth quarter of 2007.

The DFR Notes bear interest at the three-month LIBOR (3.76% at September 26, 2008) plus 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The DFR Notes are secured by certain equity interests of DFR and certain of its subsidiaries. The $1,776 original imputed discount on the DFR Notes is being accreted to “Other income (expense), net” in the accompanying unaudited condensed consolidated statement of operations using the interest rate method. The DFR Notes, net of unamortized discount, are reflected as “Notes receivable” in the accompanying unaudited condensed consolidated balance sheets.

Conversion of Convertible Preferred Stock and Dividend of DFR Common Stock

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9,629,368 preferred shares we held into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of our 9,835,010 shares of DFR common stock, which also included the 205,642 common shares of DFR discussed above, to our stockholders. The dividend, which was valued at $14,464, was paid on April 4, 2008 to holders of record of our class A common stock (the “Class A Common Stock”) and our class B common stock (the “Class B Common Stock”) on March 29, 2008.

Other than Temporary Losses and Equity in Losses of DFR

On March 18, 2008, in response to unanticipated credit and liquidity events in the first quarter of 2008, DFR announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by deterioration of the global credit markets and, as a result, it sold $2,800,000 of its agency and $1,300,000 of its AAA-rated non-agency mortgage-backed securities and reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4,200,000, all at a net after-tax loss of $294,300 to DFR.

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Based on the events described above and their negative effect on the market price of DFR common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9,629,368 common shares, which were received upon the conversion of the convertible preferred stock as of March 11, 2008, as well as the 205,642 common shares which were distributed to us in connection with the Deerfield Sale, were impaired. As a result, as of March 11, 2008, we recorded an other than temporary loss which is included in “Investment (loss) income, net,” in the accompanying unaudited condensed consolidated statement of operations for the nine months ended September 28, 2008 of $67,594 (without tax benefit as described below) which included $11,074 of pre-tax unrealized holding losses previously recorded as of December 30, 2007 and included in “Accumulated other comprehensive income (loss)”, a component of stockholder’s equity in the accompanying 2007 condensed consolidated balance sheet. These common shares were considered available-for-sale securities due to the limited period they were to be held as of March 11, 2008 (the “Determination Date”) before the dividend distribution of the shares to our stockholders on April 4, 2008. We also recorded an additional impairment charge from March 11, 2008 through March 29, 2008 of $492. As a result of the dividend, the income tax loss that resulted from the decline in value of our investment of $68,086 is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

Additionally, from December 31, 2007 through the Determination Date, we recorded approximately $754 of equity in net losses of DFR which are included in “Other income (expense), net” in the accompanying unaudited condensed consolidated statement of operations for the nine months ended September 28, 2008 related to our investment in the 205,642 common shares of DFR discussed above which were accounted for on the equity method through the Determination Date.

The dislocation in the mortgage sector and continuing weakness in the broader financial market has adversely impacted, and may continue to adversely impact, DFR’s cash flows and DFR has reported operating losses for the first six months of 2008. However, we have received timely payment of all three quarterly interest payments on the DFR Notes due to date. Additionally, on October 15, 2008 we received a $1,070 dividend on the convertible preferred stock which we previously held. Based on the Deerfield Sale agreement, payment of a dividend by DFR on this preferred stock was dependent on DFR’s board of directors declaring and paying a dividend on DFR’s common stock. The first dividend to be declared on their common stock following the date of the Deerfield Sale was declared in our 2008 third quarter and paid on October 15, 2008. Therefore, during the 2008 third quarter, we recognized the dividend income from DFR. Certain expenses totaling $6,201 related to the Deerfield Sale, which were a liability of the Company and for which we had an equal offsetting receivable from DFR as of December 30, 2007, were paid by DFR during 2008. DFR qualified for REIT status in previous quarters; however, on October 2, 2008, DFR announced, among other things, its conversion to a C corporation and the termination of its REIT status. Updated financial information from DFR for their 2008 third quarter ended September 30, 2008 will not be available until the filing of DFR’s Form 10-Q. Based on current publicly-available information and the other factors discussed above, we believe the DFR Notes are fully collectible.

(4)	Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, as amended, “Fair Value Measurements,” (“SFAS 157”). SFAS 157 addresses issues relating to the definition of fair value, the methods used to measure fair value and expanded disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The definition of fair value in SFAS 157 focuses on the price that would be received to sell an asset or paid to transfer a liability, not the price that would be paid to acquire an asset or received to assume a liability. The methods used to measure fair value should be based on the assumptions that market participants would use in pricing an asset or a liability (“Market Value Approach”). SFAS 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to adoption. FASB Staff Position (“FSP”) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (“FSP FAS 157-1”), states that SFAS 157 does not apply under SFAS No. 13, “Accounting for Leases” (“SFAS 13”), and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. In addition, FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), defers the application of SFAS 157 to nonfinancial assets and nonfinancial liabilities until our 2009 fiscal year, except for items recognized or disclosed on a recurring basis at least annually. FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market that is Not Active,” (“FSP FAS 157-3”) clarifies the application of SFAS 157 when the market for a financial asset is inactive. This new guidance illustrates the fact that approaches other than the Market Value Approach to determining fair value may be appropriate for instruments such as those for which the market is no longer active. In utilizing these other approaches, however, the guidance reiterates certain of the measurement principles described in SFAS 157. SFAS 157 was, with some limited exceptions, applied prospectively and was effective commencing with our first fiscal quarter of 2008, with the exception of the areas mentioned above under which exemptions to or deferrals of the application of certain aspects of SFAS 157 apply. Our adoption of SFAS 157 and the related staff positions in 2008 did not result in any change in the methods we use to measure the fair value of our financial assets and liabilities. We are presenting the expanded fair value disclosures of SFAS 157 below.

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SFAS 157 and related staff positions valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the following hierarchy:

Level 1 Inputs—Quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs—Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. In some cases, observable market data may require significant adjustment to meet the objective of fair value, particularly in cases of markets that are no longer active. If the adjustment is significant, the measurement would be considered Level 3.

Level 3 Inputs— Pricing inputs are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the asset and liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

Our financial assets and liabilities as of September 28, 2008 include available-for-sale investments, investment derivatives and various investments in liability positions. The available-for-sale securities, investment derivatives, and various investments in liability positions include those managed (the “Equities Account”) by a management company formed by our Chairman and then Chief Executive Officer and our Vice Chairman and then President and Chief Operating Officer (the “Former Executives”) and a director who is also our former Vice Chairman (the “Management Company”). We determine fair value of our available-for-sale securities and investment derivatives principally using quoted market prices, broker/dealer prices or statements of account received from investment managers, which were principally based on quoted market or broker/dealer prices. We determine fair value of our interest rate swaps using quotes provided by the respective bank counterparties that are based on models whose inputs are observable LIBOR forward interest rate curves. We believe that these fair value determinations still follow appropriate methodology even given recent changes in the overall financial markets.

The fair values of our financial assets or liabilities and the hierarchy of the level of inputs are summarized below:

	September 28,		Fair Value Measurements at September 28, 2008 Using
	2008		Level 1		Level 2		Level 3

Assets
Available-for-sale securities:
Equities Account – restricted (a)	$	55,896	$	55,896	$	-	$	-
Investment derivatives in the Equities Account:
Put options on market index-restricted (a)		6,244		6,244		-		-
Total return swap on an equity security – restricted (a)		160		160		-		-
Total assets	$	62,300	$	62,300	$	-	$	-

Liabilities
Interest rate swaps in a liability position (included in “Accrued expenses and other current liabilities”)	$	165	$	-	$	165	$	-
Investment derivatives in the Equities Account:
Put and call option combinations on an equity security-restricted (b)		1,111		1,111		-		-
Total return swap on equity securities-restricted (b)		1,324		1,324		-		-
Total liabilities	$	2,600	$	2,435	$	165	$	-

(a)

Included in “Investments” on the accompanying unaudited condensed consolidated balance sheet as of September 28, 2008. Investments also include $8,152 of cost basis investments. During the fourth quarter of 2008, we have experienced additional losses on our available for sale securities (see Note 10).

(b)	Included in “Other liabilities” on the accompanying unaudited condensed consolidated balance sheet as of September 28, 2008.

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(5) Other Business Acquisitions

We completed the acquisitions of the operating assets, net of liabilities assumed, of 45 franchised restaurants, including 41 restaurants in the California market, in two separate transactions during the nine months ended September 28, 2008. The total consideration, before post-closing adjustments, for the acquisitions was $15,809 consisting of (1) $8,890 of cash (before consideration of $45 of cash acquired), (2) the assumption of $6,239 of debt and (3) $680 of related expenses. The aggregate purchase price of $16,296 also included $693 of losses from the settlement of unfavorable franchise rights and a $1,180 gain on the termination of subleases both included in “Settlement of preexisting business relationships” in the accompanying unaudited condensed consolidated statement of operations. Further, we paid an additional $15 during the nine months ended September 28, 2008 for a finalized post-closing purchase price adjustment related to other restaurant acquisitions in 2007. The impact of these acquisitions on our results of operations for the three and nine months ended September 28, 2008 was not material. Therefore, no pro forma information has been included herein.

We completed the acquisitions of the operating assets, net of liabilities assumed, of 10 franchised restaurants during the nine months ended September 30, 2007. The total consideration, before post-closing adjustments, for the acquisitions was $2,217 consisting of (1) $1,141 of cash (before consideration of $10 of cash acquired), (2) the assumption of $700 of debt and (3) $376 of related expenses. Further, we paid an additional $12 in the nine months ended September 30, 2007 for a finalized post-closing purchase price adjustment related to other restaurant acquisitions in 2006.

(6)	Impairment of Long-lived Assets

The following is a summary of our impairment losses included in “Depreciation and amortization” in the condensed consolidated statements of operations:

	Three Months Ended				Nine Months Ended
	September 30,		September 28,		September 30,		September 28,
	2007		2008		2007		2008

Restaurants, primarily properties	$	95	$	4,580	$	902	$	5,997
Asset management segment		3,028		-		4,137		-
General corporate		-		9,623		-		9,623
	$	3,123	$	14,203	$	5,039	$	15,620

The restaurant impairment losses reflect (1) impairment charges resulting from the deterioration in operating performance of certain restaurants and (2) additional charges for investments in restaurants impaired in a prior year which did not subsequently recover.

We account for goodwill under the guidance set forth in SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), which specifies that goodwill should not be amortized. Our policy is to evaluate goodwill for impairment at least annually or more frequently if events or circumstances occur that would indicate a reduction in the fair value of the Company.

During 2008, the quick service restaurant industry has experienced an adverse change in business climate which, under SFAS 142, could be an indicator that a reduction in the fair value of the Company has occurred. Accordingly, management performed an interim goodwill impairment test in accordance with SFAS 142. Although we report our Company-owned restaurants and our franchising of restaurants as one business segment and acquired Sybra, LLP (“Sybra”) and RTM Restaurant Group (“RTM”) with the expectation of strengthening and increasing the value of our Arby’s brand, our Company-owned restaurants are considered to be a separate reporting unit for purposes of measuring goodwill impairment under SFAS 142. Accordingly, goodwill is tested for impairment at the Company-owned restaurant level based on its separate cash flows independent of the Company’s strategic reasons for owning restaurants. The reporting unit for Company-owned restaurants includes the restaurants acquired in both the December 2002 acquisition of Sybra and the July 2005 acquisition of RTM (the “RTM Acquisition”). Management performed a discounted cash flow analysis using updated forward looking projections of estimated future operating results of our Company-owned restaurants. Based on the results, management has concluded that our fair value of the Company-owned restaurants exceeds their carrying value at September 28, 2008. Accordingly, goodwill is not impaired as of September 28, 2008.

We will perform our annual review of goodwill during the fourth quarter of 2008. As noted above, we anticipate that the factors which have negatively impacted our Company-owned restaurant margins through the first nine months of 2008 will continue to negatively impact Company-owned restaurant margins in the 2008 fourth quarter. Continued deterioration of Company-owned store results may result in an impairment of our goodwill.

- 10 -

We intend to dispose of one of our Company-owned aircraft as soon as practicable. As a result, we have classified this asset as held-for-sale as of September 28, 2008 and recorded a general corporate impairment charge during the 2008 third quarter to reflect its fair value as a result of the recent appraisal related to the potential sale.

(7)	Facilities Relocation and Corporate Restructuring

The facilities relocation charges incurred and recognized in our restaurant business for the nine-month periods ended September 30, 2007 and September 28, 2008 of $315 and $120, respectively, principally related to changes in the estimated carrying costs for real estate we purchased under terms of employee relocation agreements entered into as part of the RTM Acquisition. We do not currently expect to incur additional facilities relocation charges with respect to the RTM Acquisition.

The general corporate charges for the nine months ended September 30, 2007 and September 28, 2008 of $80,939 and $692, respectively, principally relate to the transfer of substantially all of our senior executive responsibilities to the executive team of Arby’s Restaurant Group, Inc. (“ARG”), a wholly-owned subsidiary, (the “Corporate Restructuring”) as further described in Notes 18 and 28 to the consolidated financial statements contained in our Form 10-K. In April 2007, we announced that we would be closing our New York headquarters and combining our corporate operations with our restaurant operations in Atlanta, Georgia. This transfer of responsibilities was completed in early 2008. Accordingly, to facilitate this transition, we entered into contractual settlements (the “Contractual Settlements”) with the Former Executives evidencing the termination of their employment agreements and providing for their resignation as executive officers effective June 29, 2007. The effect of severance arrangements entered into with other New York headquarters’ executives and employees were recorded based on their terms. In addition, we sold properties and other assets at our former New York headquarters in 2007 to an affiliate of the Former Executives. The additional provision of $692 in 2008 primarily related to current period charges for the transition severance arrangements of the other New York headquarters’ employees who continued to provide services as employees during the 2008 first half. We do not currently expect to incur additional charges with respect to the Corporate Restructuring.

The components of the facilities relocation and corporate restructuring charges and an analysis of activity in the facilities relocation and corporate restructuring accrual during the nine-month periods ended September 30, 2007 and September 28, 2008 are as follows:

	Nine Months Ended
	September 30, 2007

	Balance										Balance
	December 31,							Asset			September 30,
	2006		Provision		Payments			Write-offs			2007
Restaurant Business:
Cash obligations:
Employee relocation costs	$	134	$	315	$	(115	)	$	-		$	334
Other		687		-		(624	)					63
Total restaurant business		821		315		(739	)		-			397
General Corporate:
Cash obligations:
Severance and retention incentive compensation		-		80,104		(2,183	)		-			77,921
Non-cash charges:
Loss on sale of properties and other assets		-		835		-			(835	)		-
Total general corporate		-		80,939		(2,183	)		(835	)		77,921
	$	821	$	81,254	$	(2,922	)	$	(835	)	$	78,318

	Nine Months Ended
	September 28, 2008
										Total
										Expected
	Balance							Balance		and
	December 30,							September 28,		Incurred
	2007		Provision		Payments			2008		to Date
Restaurant Business:
Cash obligations:
Employee relocation costs	$	591	$	120		(639	)	$	72	$	4,651
Other		-		-		-			-		7,471
		591		120		(639	)		72		12,122
Non-cash charges		-		-		-			-		719
Total restaurant business		591		120		(639	)		72		12,841
General Corporate:
Cash obligations:
Severance and retention incentive compensation		12,208		692		(4,526	)		8,374		84,622
Non-cash charges		-		-		-			-		835
Total general corporate		12,208		692		(4,526	)		8,374		85,457
	$	12,799	$	812		(5,165	)	$	8,446	$	98,298

We expect to incur significant facilities relocation and corporate restructuring charges in conjunction with the Wendy’s merger; however we are unable to estimate the amount as of September 28, 2008.

(8)	Discontinued Operations

Prior to 2007, we sold the stock of the companies comprising our former premium beverage and soft drink concentrate business segments (collectively, the “Beverage Discontinued Operations”) and the stock or the principal assets of the companies comprising the former utility and municipal services and refrigeration business segments (the “SEPSCO Discontinued Operations”) and closed two restaurants which were a component of the restaurant segment (the “Restaurant Discontinued Operations”). We have accounted for all of these operations as discontinued operations.

During the nine months ended September 30, 2007, we recorded an additional net loss of $149 on the disposal of the Restaurant Discontinued Operations relating to finalizing the leasing arrangements for the two closed restaurants. During the three months ended September 28, 2008, we recorded a net $1,219 benefit principally resulting from the release of reserves for state income taxes no longer required as a result of a favorable settlement of certain state income tax liabilities.

Current liabilities remaining to be liquidated relating to discontinued operations result from certain obligations not transferred to the respective buyers and consisted of the following:

	December 30,		September 28,
	2007		2008

Liabilities, primarily accrued income taxes, relating to the Beverage Discontinued Operations	$	6,639	$	4,998
Liabilities relating to the SEPSCO Discontinued Operations		573		585
Liabilities relating to the Restaurant Discontinued Operations		67		68
	$	7,279	$	5,651

We expect that the liquidation of these remaining liabilities associated with all of these discontinued operations as of September 28, 2008 will not have any material adverse impact on our condensed consolidated financial position or results of operations. To the extent any estimated amounts included in the current liabilities relating to discontinued operations are determined to be different from the amount required to liquidate the associated liability, any such amount will be recorded at that time as a component of gain or loss from disposal of discontinued operations.

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(9) Retirement Benefit Plans

We maintain two defined benefit plans, the benefits under which were frozen in 1992 and for which we have no unrecognized prior service cost. The components of the net periodic pension cost incurred by us with respect to these plans are as follows.

	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008

Service cost (consisting entirely of plan administrative expenses)	$	22		$	24		$	67		$	72
Interest cost		55			55			165			165
Expected return on the plans’ assets		(58	)		(55	)		(174	)		(165	)
Amortization of unrecognized net loss		7			6			20			18
Net periodic pension cost	$	26		$	30		$	78		$	90

(10)	Other than temporary losses on investments

As described in Note 8 to our consolidated financial statements contained in our Form 10-K, we have a cost investment in Jurlique International Pty Ltd. (“Jurlique”), an Australian skin and beauty products company that is not publicly traded. Based on an evaluation of our investment we determined that its value had declined and that the decline was other than temporary. Therefore we recorded other than temporary losses, which are included in “Investment (loss) income, net” in the accompanying unaudited condensed consolidated statement of operations, of $6,500 (including $3,500 in the 2008 second quarter and $3,000 in the 2008 third quarter) in the first nine months of 2008. The remaining carrying value of $2,004 is included in “Investments” in the accompanying unaudited condensed consolidated balance sheet.

As described in Note 28 to our consolidated financial statements contained in our Form 10-K, we invested $75,000 in the Equities Account which generally co-invests on a parallel basis with the management company’s equity funds. We analyzed our unrealized losses as of September 28, 2008 and, due to current market conditions and other factors, we recorded an other than temporary loss, which is included in “Investment (loss) income, net” in the accompanying unaudited condensed consolidated statement of operations, of $5,100 during the third quarter of 2008. Additionally, during the 2008 third quarter $30,000 of restricted cash in the Equities Account was transferred to Wendy’s/Arby’s. The remaining carrying value of our available-for-sale securities of $55,896 as of September 28, 2008 is included in “Investments” in the unaudited condensed consolidated balance sheet. As of a result of continuing weakness in the economy during the fourth quarter of 2008 and its effect on the financial market, our available for sale securities which are held in the Equities Account have experienced a decrease, as of October 31, 2008, of approximately $11,000 in their fair value as compared to their September 28, 2008 carrying and fair values (see Note 4). Such decreases could result in additional other than temporary losses on our available for sale securities held in the Equities Account in the fourth quarter of 2008.

(11)	Income Taxes

Our effective tax rate provision on the income from continuing operations before income taxes and minority interests for the three months ended September 30, 2007 was 64% and our effective tax rate benefit on the loss for the nine months ended September 30, 2007 was 63%. We had a tax provision of $2,938, despite the loss from continuing operations before income taxes and minority interests, for the three months ended September 28, 2008 and an effective tax rate benefit of 12% on the loss for nine months ended September 28, 2008. These rates vary from the U.S. federal statutory rate of 35% due to (1) the effect of the decline in value of our DFR investment in the 2008 first quarter and related declared dividend, (2) the effect of recognizing a previously unrecognized contingent tax benefit in the 2007 second quarter in connection with the settlement of certain obligations to the Former Executives, (3) the effect in the 2007 and 2008 third quarters of changes in our estimated full year tax rates, (4) the effect of non-deductible compensation and other non-deductible expenses, (5) state income taxes, net of federal income taxes and (6) adjustments to our uncertain tax positions.

In the 2008 first quarter, we distributed our investment in the common stock of DFR as a dividend to our stockholders as described in Note 3. As a result of the dividend, the tax loss that resulted from the decline in value of our investment through the record date of the dividend to our stockholders is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

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We adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainties in Income Taxes” (“FIN 48”) on January 1, 2007. At December 30, 2007 the amount of unrecognized tax benefits was $12,266. During the three months and nine month periods ended September 28, 2008, unrecognized tax benefits increased $1,893 and $449 respectively. The third quarter increase is principally the effect on our unrecognized tax benefits of proposed unfavorable adjustments from a state examination for our 2005 through 2007 income tax returns partially offset in the nine months by a decrease in the first quarter related to a favorable settlement of an examination of 1998 through 2000. We do not anticipate a significant change in unrecognized tax positions during the next year.

We recognize interest related to unrecognized tax benefits in “Interest expense” and penalties in “General and administrative expenses”. At December 30, 2007 we had accrued interest and penalties of $3,328 and $247, respectively. During the three months and nine months ended September 28, 2008, we recorded interest increases (decreases) of $56 and ($510) and penalty increases of $268 and $268, respectively. The changes to interest and penalties are principally the result of the state examinations described above.

We include unrecognized tax benefits and the related interest and penalties for discontinued operations in “Current liabilities relating to discontinued operations” in the accompanying unaudited condensed consolidated balance sheets. In the third quarter of 2008, examinations by three jurisdictions were favorably settled and we recorded a benefit of $1,251 to “Income (loss) from disposal of discontinued operations, net of income taxes.” There were no other significant changes to unrecognized tax benefits recorded in “Current liabilities relating to discontinued operations” during the first nine months of 2008.

(12) Income (Loss) per Share

Basic income (loss) per share has been computed by dividing the allocated income or loss for our Class A Common Stock and our Class B Common Stock by the weighted average number of shares of each class. Both factors are presented in the tables below. Net income for three month period ended September 30, 2007 was allocated between the Class A Common Stock and Class B Common Stock based on the actual dividend payment ratio. Net loss for the three-month period ended September 28, 2008 and the nine-month periods ended September 30, 2007 and September 28, 2008 was allocated equally among each share of Class A Common Stock and Class B Common Stock, resulting in the same loss per share for each class.

Due to the merger with Wendy’s on September 29, 2008, the number of outstanding shares has increased by approximately 377,000,000, which will affect the earnings (loss) per share computation in future periods (see Note 2). In addition, effective on the date of the Wendy’s merger, our Class B Common Stock was converted into Class A Common Stock.

Diluted income per share for the three-month period ended September 30, 2007 has been computed by dividing the allocated income for the Class A Common Stock and Class B Common Stock by the weighted average number of shares of each class plus the potential common share effects on each class of dilutive stock options and our Class B restricted shares each computed using the treasury stock method as presented in the table below. The shares used to calculate diluted income per share for the three months ended September 30, 2007 exclude any effect of the Company’s 5% convertible notes due 2023 (the “Convertible Notes”) which would have been antidilutive since the after-tax interest on the Convertible Notes per share of Class A Common Stock and Class B Common Stock obtainable on conversion exceeded the reported basic income from continuing operations per share. Diluted loss per share for the three-month period ended September 28, 2008 and the nine-month periods ended September 30, 2007 and September 28, 2008 from continuing operations is not shown since the effect of all potentially dilutive securities on the loss from continuing operations per share would have been antidilutive. The basic and diluted loss from discontinued operations per share for the nine-month period ended September 30, 2007 was less than $.01 and, therefore, is not presented on the condensed consolidated statements of operations.

Our securities as of September 28, 2008 that could have a dilutive effect on any future basic income per share calculations for periods subsequent to September 28, 2008 are (1) outstanding stock options which can be exercised into 885,000 shares and 5,322,000 shares of our Class A Common Stock and Class B Common Stock, respectively, (2) 48,000 and 351,000 non-vested restricted shares of our Class A Common Stock and Class B Common Stock, respectively, which principally vest over three years and (3) $2,100 of Convertible Notes which are convertible into 53,000 shares and 107,000 shares of our Class A Common Stock and Class B Common Stock, respectively, as adjusted due to the dividend of the DFR common stock to our stockholders paid on April 4, 2008. As noted above, in connection with the merger with Wendy’s, all of our Class B Common Stock was converted into Class A Common Stock.

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Income (loss) per share has been computed by allocating the income or (loss) as follows:

	Three Months Ended					Nine Months Ended
	September 30,		September 28,			September 30,			September 28,
	2007		2008			2007			2008
Class A Common Stock:
Continuing operations	$	1,072	$	(4,170	)	$	(5,334	)	$	(27,380	)
Discontinued operations		-		380			(47	)		380
Net income (loss)	$	1,072	$	(3,790	)	$	(5,381	)	$	(27,000	)

Class B Common Stock:
Continuing operations	$	2,659	$	(9,196	)	$	(11,748	)	$	(60,362	)
Discontinued operations		-		839			(102	)		839
Net income (loss)	$	2,659	$	(8,357	)	$	(11,850	)	$	(59,523	)

The number of shares used to calculate basic and diluted income (loss) per share were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,		September 28,		September 30,		September 28,
	2007		2008		2007		2008
Class A Common Stock:
Basic weighted average shares outstanding		28,882		28,905		28,821		28,903
Dilutive effect of stock options		115		-		-		-
Diluted shares		28,997		28,905		28,821		28,903

Class B Common Stock:
Basic weighted average shares outstanding		63,655		63,745		63,478		63,720
Dilutive effect of stock options and restricted shares		707		-		-		-
Diluted Shares		64,362		63,745		63,478		63,720

(13) Other Comprehensive Loss

The following is a summary of the components of other comprehensive loss, net of income taxes and minority interests:

	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008

Net income (loss)	$	3,731		$	(12,147	)	$	(17,231	)	$	(86,523	)
Net unrealized gains (losses) on available-for-sale securities (a)		(1,569	)		2,520			(8,636	)		6,196
Net unrealized gains (losses) on cash flow hedges (b)		(2,543	)		486			(2,409	)		55
Net change in currency translation adjustment		381			(43	)		651			(149	)
Other comprehensive loss	$	-		$	(9,184	)	$	(27,625	)	$	(80,421	)

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(a) Net unrealized gains (losses) on available-for-sale securities:
	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008

Unrealized holding gains (losses) arising during the period	$	(2,145	)	$	3,091		$	3,639		$	1,664
Reclassifications of prior period unrealized holding (gains) losses into net income or loss		(426	)		872			(16,782	)		8,262
Unrealized holding gain arising from the reclassification of an investment previously accounted for under the equity method to an available-for-sale investment		-			-			550			-
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		301			-			(821	)		(201	)
		(2,270	)		3,963			(13,414	)		9,725
Income tax benefit (provision)		861			(1,443	)		4,860			(3,529	)
Minority interests in change in unrealized holding gains and losses of a consolidated subsidiary		(160	)		-			(82	)		-
	$	(1,569	)	$	2,520		$	(8,636	)	$	6,196

(b) Net unrealized gains (losses) on cash flow hedges:
	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008

Unrealized holding losses arising during the period	$	(1,094	)	$	(9	)	$	(296	)	$	(1,526	)
Reclassifications of prior period unrealized holding (gains) losses into net income or loss		(513	)		804			(1,546	)		1,613
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		(2,440	)		-			(2,006	)		3
		(4,047	)		795			(3,848	)		90
Income tax benefit (provision)		1,504			(309	)		1,439			(35	)
	$	(2,543	)	$	486		$	(2,409	)	$	55

(14)	Business Segments

Prior to the Deerfield Sale (see Note 3) on December 21, 2007, we managed and internally reported our operations as two business segments: (1) the operation and franchising of restaurants (“Restaurants”) and (2) asset management (“Asset Management”). We currently manage and internally report our operations as one business segment; the operation and franchising of restaurants. We evaluated segment performance and allocated resources based on the segment’s earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA, a non-GAAP measure, is defined as operating profit (loss) as adjusted by depreciation and amortization. In computing EBITDA and operating profit (loss), interest expense and non-operating income and expenses were not considered. General corporate assets consist primarily of cash and cash equivalents, note receivable from related parties, non-current investments, deferred costs and other assets and properties.

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The following is a summary of our segment information:

	Three Months Ended						Nine Months Ended
	September 30,			September 28,			September 30,			September 28,
	2007			2008			2007			2008
Revenues:
Restaurants	$	307,273		$	310,371		$	893,421		$	926,239
Asset Management		16,940			-			49,659			-
Consolidated revenues	$	324,213		$	310,371		$	943,080		$	926,239
EBITDA:
Restaurants (a)	$	44,507		$	44,186		$	119,820		$	110,319
Asset Management		5,551			-			11,880			-
General corporate (a)		(8,092	)		(9,688	)		(115,316	)		(25,830	)
Consolidated EBITDA		41,966			34,498			16,384			84,489
Depreciation and amortization:
Restaurants		14,661			20,455			43,146			51,975
Asset Management		4,289			-			8,003			-
General corporate		1,072			10,246			3,262			12,412
Consolidated depreciation and amortization		20,022			30,701			54,411			64,387
Operating profit (loss):
Restaurants (a)		29,846			23,731			76,674			58,344
Asset Management		1,262			-			3,877			-
General corporate (a)		(9,164	)		(19,934	)		(118,578	)		(38,242	)
Consolidated operating profit (loss)		21,944			3,797			(38,027	)		20,102
Interest expense		(15,489	)		(13,585	)		(46,164	)		(41,020	)
Investment (loss) income, net		(1,083	)		(1,376	)		39,690			(76,497	)
Other income (expense), net		1,101			1,062			5,866			(2,279	)
Consolidated income (loss) from continuing operations before income taxes and minority interests	$	6,473		$	(10,102	)	$	(38,635	)	$	(99,694	)

	September 28,
	2008
Identifiable assets:
Restaurants	$	1,123,428
General corporate		198,742
Consolidated total assets	$	1,322,170

(a)

During the third quarter of 2008, Wendy’s/Arby’s entered into an intercompany agreement documenting an arrangement under which our restaurant segment (ARG) is and has been providing management services (including executive, legal, accounting, financial reporting, treasury, financial planning and tax) to our corporate segment (Wendy’s/Arby’s) for the 2008 fiscal year. In consideration for the provision of these services, Wendy’s/Arby’s agreed to pay an amount equal to the direct costs incurred by ARG plus 5%. For the first nine months of 2008, $4,854 was charged to and paid by Wendy’s/ Arby’s to ARG.

- 16 -

(15)	Transactions with Related Parties

We continue to have related party transactions of the same nature and general magnitude as those described in Note 28 to the consolidated financial statements contained in the Form 10-K, other than those related to the recently completed Corporate Restructuring (See Note 7) and those mentioned below:

Final Liquidating Distribution of Triarc Deerfield Holdings, LLC

As defined in an equity arrangement further described in Note 1 to our consolidated financial statements contained in our Form 10-K, the Deerfield Sale was an event of dissolution of Triarc Deerfield Holdings, LLC (“TDH”), a former subsidiary of ours. As of the date of liquidation, $743 payable to the minority shareholders of TDH (which included former members of our management) was distributed to them in connection with its dissolution during April 2008.

Sublease to affiliate of Former Executives

As described in Note 28 to the consolidated financial statements contained in our 2007 Form 10-K, the Management Company had subleased one of the floors of our former New York Headquarters. As of July 1, 2008, we entered into an agreement under which this same affiliate is subleasing additional office space in our former New York headquarters. Under the terms of that agreement, the affiliate subleased through the remaining approximately four-year term of the prime lease with annual rent of approximately $397, equal to the rent we incur under the prime lease.

Equities Account Transactions

During the third quarter of 2008, 251,320 shares of Wendy’s stock, which were included in the Equities Account, were sold to the Management Company at the closing market value as of the day we decided to sell the shares. The sale resulted in a loss of $38 and the proceeds of $5,740 were retained in the Equities Account as “Restricted cash equivalents.”

Additionally, during the 2008 third quarter $30,000 of restricted cash in the Equities Account was transferred to Wendy’s/Arby’s. We are obligated to return this amount to the Equities Account by December 31, 2008.

Distributions to 280 BT Holdings LLC minority shareholders

As described in Note 28 to the consolidated financial statements contained in our 2007 Form 10-K, the Company has an 80.1% ownership percentage in 280 BT Holdings LLC (“280 BT”) with the remainder owned by former Company management. During the third quarter 2008, we received distributions from certain of the investments that are owned by 280 BT. The minority portions of these distributions were then further distributed to 280 BT’s minority shareholders.

Sale of Helicopter Interest

As described in Note 28 to the consolidated financial statements contained in our 2007 Form 10-K, the Company previously granted the Management Company the right, at its option, to assume the Company’s 25% fractional interest in a helicopter (the “Helicopter Interest”) on October 1, 2008. The Management Company exercised its option to assume the Helicopter Interest on that date. Therefore, it has paid the Company $1,860 which is equal to the value, as defined, that the Company would have received under the related agreement if the Company exercised its right to sell its Helicopter Interest to the broker on October 1, 2008. At September 28, 2008, the Helicopter Interest of $1,860 is included in “Prepaid expenses and other current assets” in the accompanying unaudited condensed consolidated balance sheet.

(16)	Legal and Environmental Matters

In 2001, a vacant property owned by Adams Packing Association, Inc. (“Adams”), an inactive subsidiary of ours, was listed by the United States Environmental Protection Agency on the Comprehensive Environmental Response, Compensation and Liability Information System (“CERCLIS”) list of known or suspected contaminated sites. The CERCLIS listing appears to have been based on an allegation that a former tenant of Adams conducted drum recycling operations at the site from some time prior to 1971 until the late 1970s. The business operations of Adams were sold in December 1992. In February 2003, Adams and the Florida Department of Environmental Protection (the “FDEP”) agreed to a consent order that provided for development of a work plan for further investigation of the site and limited remediation of the identified contamination. In May 2003, the FDEP approved the work plan submitted by Adams’ environmental consultant and during 2004 the work under that plan was completed. Adams submitted its contamination assessment report to the FDEP in March 2004. In August 2004, the FDEP agreed to a monitoring plan consisting of two sampling events which occurred in January and June 2005 and the results were submitted to the

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FDEP for its review. In November 2005, Adams received a letter from the FDEP identifying certain open issues with respect to the property. The letter did not specify whether any further actions are required to be taken by Adams. Adams sought clarification from the FDEP in order to attempt to resolve this matter. On May 1, 2007, the FDEP sent a letter clarifying their prior correspondence and reiterated the open issues identified in their November 2005 letter. In addition, the FDEP offered Adams the option of voluntarily taking part in a recently adopted state program that could lessen site clean up standards, should such a clean up be required after a mandatory further study and site assessment report. With our consultants and outside counsel, we reviewed this option and sent our response and proposed work plan to FDEP on April 24, 2008 and are awaiting FDEP’s response. Nonetheless, based on amounts spent prior to 2007 of approximately $1,667 for all of these costs and after taking into consideration various legal defenses available to us, including Adams, we expect that the final resolution of this matter will not have a material effect on our financial position or results of operations.

On April 25, 2008, a putative class action complaint was filed by Ethel Guiseppone, on behalf of herself and others similarly situated, against Wendy’s, its directors, the Company (then known as Triarc Companies, Inc.), and Trian Partners, in the Franklin County, Ohio Court of Common Pleas. A motion for leave to file an amended complaint was filed on June 19, 2008. The proposed amended complaint alleged breach of fiduciary duties arising out of the Wendy’s board of directors’ search for a merger partner and out of its approval of the merger agreement on April 23, 2008, and failure to disclose material information related to the merger in Amendment No. 3 to the Form S-4 under the Securities Act of 1933 (the “Form S-4”). The proposed amended complaint sought certification of the proceeding as a class action; preliminary and permanent injunctions against disenfranchising the purported class and consummating the merger; a declaration that the defendants breached their fiduciary duties; costs and attorneys fees; and any other relief the court deems proper and just.

Also on April 25, 2008, a putative class action and derivative complaint was filed by Cindy Henzel, on behalf of herself and others similarly situated, and derivatively on behalf of Wendy’s, against Wendy’s and its directors in the Franklin County, Ohio Court of Common Pleas. A motion for leave to file an amended complaint was filed on June 16, 2008. The proposed amended complaint alleges breach of fiduciary duties arising out of the Wendy’s board of directors’ search for a merger partner and out of its approval of the merger agreement on April 23, 2008, and failure to disclose material information related to the merger in the Form S-4. The proposed amended complaint seeks certification of the proceeding as a derivative and class action; an injunction against consummating the merger and requiring the defendants to promptly hold an annual meeting and to seek another merger partner; rescission of any part of the merger agreement already implemented; a declaration that the defendants breached their fiduciary duties; costs and attorneys fees; and any other relief the court deems proper and just.

On May 22, 2008, a putative class action complaint was filed by Ronald Donald Smith, on behalf of himself and others similarly situated, against Wendy’s and its directors in the Franklin County, Ohio Court of Common Pleas. A motion for leave to file an amended complaint was filed on June 30, 2008. The proposed amended complaint alleged breach of fiduciary duties arising out of the Wendy’s board of directors’ search for a merger partner and out of its approval of the merger agreement on April 23, 2008, and failure to disclose material information related to the merger in the Form S-4. The proposed amended complaint sought certification of the proceeding as a derivative and class action; an injunction against consummating the merger and requiring the defendants to promptly hold an annual meeting and to seek another merger partner; rescission of any part of the merger agreement already implemented; a declaration that the defendants breached their fiduciary duties; costs and attorneys fees; and any other relief the court deems proper and just.

On June 13, 2008, a putative class action complaint was filed by Peter D. Ravanis and Dorothea Ravanis, on behalf of themselves and others similarly situated, against Wendy’s, its directors, and Triarc Companies, Inc. in the Supreme Court of the State of New York, New York County. An amended complaint was filed on June 20, 2008. The amended complaint alleges breach of fiduciary duties arising out of the Wendy’s board of directors’ search for a merger partner and out of its approval of the merger agreement on April 23, 2008, and failure to disclose material information related to the merger in the Form S-4. The amended complaint seeks certification of the proceeding as a class action; preliminary and permanent injunctions against consummating the merger; other equitable relief; attorneys’ fees; and any other relief the court deems proper and just. All parties to this case have jointly requested that the court stay the action pending resolution of the Ohio cases.

On July 9, 2008, the parties to the three Ohio actions described above filed a stipulation and proposed order that would consolidate the cases, provide for the proposed amended complaint in the Henzel case to be the operative complaint in each of the cases, designate one law firm as lead plaintiffs’ counsel, and establish an answer date for the defendants in the consolidated case. The court entered the order as proposed in all three cases on July 9, 2008.

On August 13, 2008, counsel for the parties to the Guiseppone, Henzel, Smith and Ravanis cases described above entered into a memorandum of understanding in which they agreed upon the terms of a settlement of all such lawsuits, which would include the dismissal with prejudice, and release, of all claims against all the defendants, including Wendy’s, its directors, us and

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Trian Partners. In connection with the settlement, Wendy’s agreed to make certain additional disclosures to its shareholders, which were contained in the Form S-4 and to pay plaintiffs’ legal fees.

The memorandum of understanding also contemplates that the parties will enter into a stipulation of settlement. There can be no assurance that the parties will ultimately enter into such stipulation of settlement or that the court will approve the settlement even if the parties were to enter into such stipulation. In such event, the proposed settlement as contemplated by the memorandum of understanding may be terminated.

The defendants believe that the Guiseppone, Henzel, Smith and Ravanis cases described above are without merit and intend to vigorously defend them in the event that the parties do not enter in the stipulation of settlement or if court approval is not obtained. While we do not believe that these actions will have a material adverse effect on our financial condition or results of operations, unfavorable rulings could occur. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our results of operations for the period in which the ruling occurs or for future periods.

In addition to the matters described above, we are involved in other litigation and claims incidental to our current and prior businesses. We have reserves for all of our legal and environmental matters aggregating $617 as of September 28, 2008. Although the outcome of these matters cannot be predicted with certainty and some of these matters may be disposed of unfavorably to us, based on currently available information, including legal defenses available to us, and given the aforementioned reserves and our insurance coverages, we do not believe that the outcome of these legal and environmental matters will have a material adverse effect on our condensed consolidated financial position or results of operations.

(17) Accounting Standards

Accounting Standards Adopted during 2008

We adopted SFAS 157 during 2008. During the 2008 third quarter, FSP FAS 157-3 was issued and adopted which amends SFAS 157 by giving further guidance in determining fair value of a financial asset when there is no active market for such assets at the measurement date. See Note 4 for further discussion regarding these adoptions.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 does not mandate but permits the measurement of many financial instruments and certain other items at fair value in order to provide reporting entities the opportunity to mitigate volatility in reported earnings, without having to apply complex hedge accounting provisions, caused by measuring related assets and liabilities differently. SFAS 159 requires the reporting of unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 also requires expanded disclosures related to its application. SFAS 159 was effective commencing with our first fiscal quarter of 2008 (see Note 8). We did not elect the fair value option described in SFAS 159 for financial instruments and certain other items. We did, however, adopt the provisions of SFAS 159 which relate to the amendment of FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which applies to all entities with available-for-sale and trading securities in the first quarter of 2008 (see Note 4). These provisions of SFAS 159 require separate presentations of the fair value of available for sale securities and trading securities. In addition, cash flows from trading security transactions are classified based on the nature and purpose for which the securities were acquired. The adoption of these provisions did not have an impact on our condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”). These statements change the way companies account for business combinations and noncontrolling interests by, among other things, requiring (1) more assets and liabilities to be measured at fair value as of the acquisition date, including a valuation of the entire company being acquired where less than 100% of the company is acquired, (2) an acquirer in preacquisition periods to expense all acquisition-related costs, (3) changes in acquisition related deferred tax balances after the completion of the purchase price allocation be recognized in the statement of operations as opposed to goodwill and (4) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of stockholders’ equity. These statements are to be applied prospectively beginning with our 2009 fiscal year. However, SFAS 160 requires entities to apply the presentation and disclosure requirements retrospectively for all periods presented. Both standards prohibit early adoption. In addition, in April 2008, the FASB issued FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). In determining the useful life of acquired intangible assets, FSP FAS 142-3 removes the requirement to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions and, instead, requires an entity to consider its own historical experience in renewing similar arrangements. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. This staff position is effective for financial statements issued for fiscal years beginning in our 2009 fiscal year and may impact any intangible assets we acquire. The application of SFAS 160 will require reclassification of minority interests from a liability to a component of stockholders’ equity in our consolidated financial statements beginning in our 2009 fiscal year. Further, all of the statements referred to above could have a significant impact on the accounting for any future acquisitions starting with our 2009 fiscal year. The impact will depend upon the nature and terms of such future acquisitions, if any. These statements will not have an effect on our accounting for the Wendy’s merger except for any potential adjustments to deferred taxes included in the allocation of the purchase price after such allocation has been finalized.

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In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (“SFAS 133”) and how these items affect a company's financial position, results of operations and cash flows. SFAS 161 affects only these disclosures and does not change the accounting for derivatives. SFAS 161 is to be applied prospectively beginning with the first quarter of our 2009 fiscal year. We are currently evaluating the impact, if any, that SFAS 161 will have on the disclosures in our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP. This statement will become effective during our 2008 fourth quarter. We do not expect any significant impact on our consolidated financial statements upon implementation of this pronouncement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Effective September 29, 2008, in conjunction with the merger with Wendy’s International, Inc. (“Wendy’s”) described below under “Introduction and Executive Overview – Merger with Wendy’s International, Inc.”, the corporate name of Triarc Companies, Inc. (“Triarc”) changed to Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s” or, together with its subsidiaries, the “Company” or “We”). This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company should be read in conjunction with our accompanying unaudited condensed consolidated financial statements included elsewhere herein and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (the “Form 10-K”). Item 7 of our Form 10-K describes the application of our critical accounting policies for which there have been no significant changes as of September 28, 2008. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II – Other Information” preceding “Item 1.” Because the merger with Wendy’s did not occur until the 2008 fourth quarter, the results of operations of Wendy’s are not included in this report. The results of operations discussed below will not be indicative of future results due to the consummation of the merger transaction with Wendy’s as well as the 2007 sale of our interest in Deerfield & Company LLC (“Deerfield”) discussed below.

Introduction and Executive Overview

We currently operate in one business segment—the restaurant business through our Company-owned and franchised Arby’s restaurants. Prior to December 21, 2007, we also operated in the asset management business through our 63.6% capital interest in Deerfield. On December 21, 2007, we sold our capital interest in Deerfield (the “Deerfield Sale”) to Deerfield Capital Corp., a real estate investment trust (“DFR”). As a result of the Deerfield Sale, our 2008 financial statements include only the financial position, results of operations and cash flows from the restaurant business.

In April 2007 we announced that we would be closing our New York headquarters and combining its corporate operations with our restaurant operations in Atlanta, Georgia (the “Corporate Restructuring”). The Corporate Restructuring included the transfer of substantially all of our senior executive responsibilities to the executive team of Arby’s Restaurant Group, Inc. (“ARG”), a wholly-owned subsidiary of ours, in Atlanta, Georgia. This transition was completed in early 2008. Accordingly, to facilitate this transition, the Company entered into negotiated contractual settlements (the “Contractual Settlements”) with our Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President and Chief Operating Officer, (collectively, the “Former Executives”) evidencing the termination of their employment agreements and providing for their resignation as executive officers as of June 29, 2007 (the “Separation Date”). In addition, we sold properties and other assets at our former New York headquarters in 2007 to an affiliate of the Former Executives and we incurred charges for the transition severance arrangements of other New York headquarters’ executives and employees who continued to provide services as employees through the 2008 first quarter.

In our restaurant business, we derive revenues in the form of sales by our Company-owned restaurants and franchise revenues which include (1) royalty income from franchisees, (2) franchise and related fees and (3) rental income from properties leased to franchisees. Our revenues will significantly increase in the 2008 fourth quarter due to the merger with Wendy’s that occurred on September 29, 2008. While approximately 78% of our existing Arby’s royalty agreements and substantially all of our new domestic royalty agreements provide for royalties of 4% of franchise revenues, our average royalty rate was 3.6% for the nine months ended September 28, 2008. In our former asset management business, revenues were generated through the date of the Deerfield Sale in the form of asset management and related fees from our management of (1) collateralized debt and collateralized loan obligation vehicles (“CDOs”), and (2) investment funds and private investment accounts (“Funds”), including DFR.

In our discussions of “Sales” and “Franchise Revenues” below, we discuss same-store sales. Beginning in our 2008 first quarter, we are reporting same-store sales commencing after a store has been open for fifteen continuous months (the “Fifteen Month Method”) consistent with the metrics used by our management for internal reporting and analysis. Prior thereto, and including the 2007 fiscal year, the calculation of same-store sales commenced after a store was open for twelve continuous months (the “Twelve Month Method”). The table summarizing the results of operations for the current quarter below provides the same-store sales percentage change using the new Fifteen Month Method, as well as our former Twelve Month Method.

Our primary goal is to enhance the value of our Company by increasing the revenues of our restaurant business, which is expected to include (1) opening additional Company-owned Arby’s and Wendy’s restaurants through acquisitions and development, effective national and local advertising initiatives, adding new menu offerings, expansion of the breakfast daypart to a majority of our Arby’s restaurants over the next two to three fiscal years and implementing operational initiatives targeted at improving service levels and convenience and (2) the possibility of other restaurant brand acquisitions.

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We also maintain an investment portfolio principally from the investment of our excess cash with the objective of generating investment income. In December 2005 we invested $75.0 million in an account (the “Equities Account”) which is managed by a management company (the “Management Company”) formed by the Former Executives and a director, who was also our former Vice Chairman (collectively, the “Principals”). The Equities Account is invested principally in equity securities, including derivative instruments, of a limited number of publicly-traded companies. In addition, the Equities Account invests in market put options in order to lessen the impact of significant market downturns. Investment income (loss) from this account includes realized investment gains (losses) from marketable security transactions, realized and unrealized gains (losses) on derivative instruments, other than temporary losses, interest and dividends. The Equities Account, including restricted cash equivalents and equity derivatives, had a fair value of $63.2 million as of September 28, 2008. This amount excludes $30.0 million of restricted cash transferred from the Equities Account to Wendy’s/Arby’s in the 2008 third quarter, which we currently intend to return to the Equities Account by December 31, 2008. As of October 31, 2008, as of a result of continuing weakness in the economy during the fourth quarter of 2008 and its effect on the financial market, there has been a decrease of approximately $11.0 million in the fair value of the available for sale securities held in the Equities Account as compared to their value on September 28, 2008.

Our restaurant business has recently experienced trends in the following areas:

Revenues

Significant decreases in general consumer confidence in the economy as well as decreases in many consumers’ discretionary income caused by factors such as deteriorating financial markets, high fuel and food costs and a continuing softening of the economy, including the real estate market;

Continuing price competition in the quick service restaurant (“QSR”) industry, as evidenced by (1) value menu concepts, which offer comparatively lower prices on some menu items, (2) combination meal concepts, which offer a complete meal at an aggregate price lower than the price of the individual food and beverage items, (3) the use of coupons and other price discounting and (4) many recent product promotions focused on the lower prices of certain menu items;

Competitive pressures due to extended hours of operation by many QSR competitors, including breakfast and late night hours;

Competitive pressures from operators outside the QSR industry, such as the deli sections and in-store cafes of major grocery and other retail store chains, convenience stores and casual dining outlets offering prepared and take-out food purchases;

Increased availability to consumers of new product choices, including (1) healthy products driven by a greater consumer awareness of nutritional issues, (2) new products that tend to include larger portion sizes and more ingredients; (3) beverage programs which offer a wider selection of premium non-carbonated beverages, including coffee and tea products and (4) sandwiches with perceived higher levels of freshness, quality and customization; and

Competitive pressures from an increasing number of franchise opportunities seeking to attract qualified franchisees.

Cost of Sales

Higher commodity prices which have increased our food costs;

Higher fuel costs, although recently moderating, which have caused increases in our utility costs and the cost of goods we purchase under distribution contracts that became effective in the second quarter of 2007;

Federal, state and local legislative activity, such as minimum wage increases and mandated health and welfare benefits which have and are expected to continue to result in increased wages and related fringe benefits, including health care and other insurance costs; and

Legal or regulatory activity related to nutritional content or menu labeling which could result in increased costs.

Other

Increased competition among QSR competitors and other businesses for available development sites and higher development costs associated with those sites.

Tightening of the overall credit markets and higher borrowing costs in the lending markets typically used to finance new unit development and remodels. These tightened credit conditions could negatively impact the renewal of franchisee licenses as well as the ability of a franchisee to meet its commitments under development, rental and franchise license agreements.

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We experience the effects of these trends directly to the extent they affect the operations of our Company-owned restaurants and indirectly to the extent they affect sales at our franchised locations and, accordingly, the royalties, rental income and franchise fees we receive from them.

Merger with Wendy’s International, Inc.

On September 29, 2008, Triarc and Wendy’s completed their previously announced merger in an all-stock transaction in which Wendy’s shareholders received a fixed ratio of 4.25 shares of Wendy’s/Arby’s class A common stock for each Wendy’s common share owned.

The merger will be accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. In accordance with this standard, we have concluded that Wendy’s/Arby’s will be the acquirer for financial accounting purposes. The total merger value will be allocated to Wendy’s net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values with the excess recognized as goodwill. Wendy’s operating results will be included in our financial statements beginning on the merger date.

Outstanding Wendy’s stock options and other equity awards were converted upon completion of the merger into stock options and equity awards with respect to Wendy’s/Arby’s common stock, based on the 4.25:1 exchange ratio. As of the merger date, all outstanding Wendy’s performance units became fully vested at the highest level of performance objectives and were settled in cash for $6.2 million in October 2008, based on the fair market value of Wendy’s common shares at the time of the merger.

As of September 28, 2008, our deferred costs related to the merger, which will be included in the total consideration to be allocated to the assets acquired and liabilities assumed, were $18.5 million and are included in “Deferred costs and other assets” on the accompanying unaudited condensed consolidated balance sheet.

Certain pre-merger executive and other officers of Wendy’s had employment agreements which included change in control provisions. The total value of these provisions at the merger date was $36.7 million. Prior to the completion of the merger, the full amount was transferred into a rabbi trust and will be paid to each executive in accordance with the terms of their respective agreements.

The Wendy’s and Arby’s brands will continue to operate independently, with headquarters in Dublin, Ohio and Atlanta, Georgia, respectively. A consolidated support center will be based in Atlanta, Georgia and will oversee all public company responsibilities as well as other shared service functions. The combined company had 10,360 systemwide restaurants in 50 states and 21 foreign countries and territories as of September 28, 2008, of which 2,577 were owned and operated by Wendy’s/Arby’s and 7,783 were owned and operated by independent franchisees.

The Deerfield Sale

On December 21, 2007, we completed the sale of our majority capital interest in Deerfield resulting in non-cash proceeds aggregating $134.6 million consisting of 9,629,368 shares of convertible preferred stock of DFR with a then estimated fair value of $88.4 million and $48.0 million principal amount of series A senior secured notes of a subsidiary of DFR due in December 2012 (the “DFR Notes”) with a then estimated fair value of $46.2 million. We also retained ownership of 205,642 common shares in DFR as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale resulted in a pretax gain of $40.2 million which was recorded in the fourth quarter of 2007.

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The DFR Notes bear interest at the three-month LIBOR (3.76% at September 26, 2008) plus 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The DFR Notes are secured by certain equity interests of DFR and certain of its subsidiaries. The $1.8 million original imputed discount on the DFR Notes is being accreted to “Other income (expense), net” using the interest rate method. The DFR Notes, net of unamortized discount, are reflected as “Notes receivable”.

Conversion of Convertible Preferred Stock and Dividend of DFR Common Stock

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9,629,368 preferred shares we held into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of our 9,835,010 shares of DFR common stock, which also included the 205,642 common shares of DFR discussed above, to our stockholders. The dividend, which was valued at $14.5 million, was paid on April 4, 2008 to holders of record of our class A common stock (the “Class A Common Stock”) and our class B common stock (the “Class B Common Stock”) on March 29, 2008.

Other than Temporary Losses and Equity in Losses of DFR

On March 18, 2008, in response to unanticipated credit and liquidity events in the first quarter of 2008, DFR announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by deterioration of the global credit markets and, as a result, it sold $2.8 billion of its agency and $1.3 billion of its AAA-rated non-agency mortgage-backed securities and reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4.2 billion, all at a net after-tax loss of $294.3 million to DFR.

Based on the events described above and their negative effect on the market price of DFR common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9,629,368 common shares, which were received upon the conversion of the convertible preferred stock as of March 11, 2008, as well as the 205,642 common shares which were distributed to us in connection with the Deerfield Sale, were impaired. As a result, as of March 11, 2008, we recorded an other than temporary loss which is included in “Investment (loss) income, net,” for the nine months ended September 28, 2008 of $67.6 million (without tax benefit as described below) which included $11.1 million of pre-tax unrealized holding losses previously recorded as of December 30, 2007 and included in “Accumulated other comprehensive income (loss)”, a component of stockholder’s equity. These common shares were considered available-for-sale securities due to the limited period they were to be held as of March 11, 2008 (the “Determination Date”) before the dividend distribution of the shares to our stockholders on April 4, 2008. We also recorded an additional impairment charge from March 11, 2008 through March 29, 2008 of $0.5 million. As a result of the dividend, the income tax loss that resulted from the decline in value of our investment of $68.1 million is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

Additionally, from December 31, 2007 through the Determination Date, we recorded approximately $0.8 million of equity in net losses of DFR which are included in “Other income (expense), net” for the nine months ended September 28, 2008 related to our investment in the 205,642 common shares of DFR discussed above which were accounted for on the equity method through the Determination Date.

The dislocation in the mortgage sector and continuing weakness in the broader financial market has adversely impacted, and may continue to adversely impact, DFR’s cash flows and DFR has reported operating losses for the first six months of 2008. However, we have received timely payment of all three quarterly interest payments due to date. Additionally, on October 15, 2008 we received a $1.1 million dividend on the convertible preferred stock which we previously held. Based on the Deerfield Sale agreement, payment of a dividend by DFR on this preferred stock was dependent on DFR’s board of directors declaring and paying a dividend on DFR’s common stock. The first dividend to be declared on their common stock following the date of the Deerfield Sale was declared in our 2008 third quarter and paid on October 15, 2008. Therefore, during the 2008 third quarter, we recognized the dividend income from DFR. DFR qualified for REIT status in previous quarters; however, on October 2, 2008, DFR announced, among other things, its conversion to a C corporation and the termination of its REIT status. Updated financial information from DFR for their 2008 third quarter ended September 30, 2008 will not be available until the filing of DFR’s Form 10-Q. Based on publicly available information and the other factors discussed above, we believe the principal amount of the DFR Notes is fully collectible.

Presentation of Financial Information

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our third quarter of fiscal 2007 commenced on July 2, 2007 and ended on September 30, 2007 (the “three months ended September 30, 2007” or the “2007 third quarter”). Our third quarter of fiscal 2008 commenced on June 30, 2008 and ended on September 28, 2008 (the “three months ended September 28, 2008” or the “2008 third quarter”). Our first nine months of fiscal 2007 commenced on January 1, 2007 and ended on September 30, 2007 (the “nine months ended September 30, 2007” or the “2007 first nine months”). Our first nine months of fiscal 2008 commenced on December 31, 2007 and ended on September 28, 2008 (the “nine months ended September 28, 2008” or the “2008 first nine months”). Each quarter contained 13 weeks and each nine-month period contained 39 weeks. Our 2007 third quarter and first nine months included the calendar basis reported results of Deerfield. The difference in reporting basis is not material to our condensed consolidated financials statements. With the exception of Deerfield, all references to years, nine-month periods, and quarters relate to fiscal periods rather than calendar periods.

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Results of Operations

Three Months Ended September 28, 2008 Compared with Three Months Ended September 30, 2007

Presented below is a table that summarizes our results of operations and compares the amount and percent of the change between the 2007 third quarter and the 2008 third quarter. Certain percentage changes between these quarters are considered not measurable or not meaningful (“n/m”).

	Three Months Ended						Change
	September 30,			September 28,
	2007			2008			Amount			Percent
	(In Millions Except Restaurant Count and Percentages)
Revenues:
Sales	$	285.5		$	287.6		$	2.1			0.7%
Franchise revenues		21.8			22.8			1.0			4.6%
Asset management and related fees		16.9			-			(16.9	)		(100.0)%
		324.2			310.4			(13.8	)		(4.3)%
Costs and expenses:
Cost of sales		210.9			222.2			11.3			5.4%
Cost of services		6.6			-			(6.6	)		(100.0)%
Advertising		20.9			17.7			(3.2	)		(15.3)%
General and administrative		42.0			36.1			(5.9	)		(14.0)%
Depreciation and amortization		20.0			30.7			10.7			53.5%
Facilities relocation and corporate restructuring		1.8			(0.1	)		(1.9	)		n/m
		302.2			306.6			4.4			1.5%
Operating profit		22.0			3.8			(18.2	)		(82.7)%
Interest expense		(15.5	)		(13.6	)		(2.1	)		(13.5)%
Investment loss, net		(1.1	)		(1.4	)		(0.3	)		(27.3)%
Other income, net		1.1			1.1			-			-
Income (loss) from continuing operations before income taxes and minority interests		6.5			(10.1	)		(16.6	)		n/m
Provision for income taxes		(4.2	)		(2.9	)		1.3			31.0%
Minority interests in (income) loss of consolidated subsidiaries		1.4			(0.3	)		(1.7	)		n/m
Income (loss) from continuing operations		3.7			(13.3	)		(17.0	)		n/m
Income from disposal of discontinued operations, net of income taxes		-			1.2			1.2			100.0%
Net income (loss)